Transferring IRA

L1: Transferring IRAIs it legal to transfer an entire IRA to my adult daughter? Would we both get hit with a huge tax bill? Looking for alternatives to splitting an IRA with husband in case of divorce. Worked 35 years; married to current husband only these last 4 years; retired 2 years ago and rolled over 401K from work into a new retirement traditional IRA. Current value is close to half a million, and would hate to be forced to split it in half with someone who contributed NOTHING to the account. Is this a case where the old saying applies: it”s cheaper to keep her? Thanks!

2007-10-05 14:47, By: Denise, IP: [65.12.159.224]

L2: Transferring IRANo, you cannot transfer an IRA to anyone else.BUT, YOU CAN NAME YOUR DAUGHTER ASTHE BENEFICIARY. Hopefully your new husband isn”tthe beneficiary, unless you want him to be. Even if he is, you can change the beneficiary to your daughter ASAP withoutHIS APPROVAL. The spouse must be the beneficiary only in employer plans, like your former 401-k.
Yours is an example of “look before you jump”, or “think before you act”, or “why didn”t you get professional advice before you got married ???”
Didn”t you get a “pre-nuptial agreement” ? I”m sure that all of these professional fees would have been less than the $ 250,000 that he will get in any divorce. You could have had your 401-k and any ROLLOVER IRA excluded from him.
At this time, you might be able to get him to agree to a “POST-NUPTIAL AGREEMENT” that he is not entitled to any part of your 401-K at the time of your marriage. However, I think any contributions, and related earnings and appreciation since the marriage may not be excluded.They are probably “marital assets”.Discuss your situation with a qualified marital attorney who should be able to come up with an agreeable solution.

2007-10-05 17:31, By: dlzallestaxes, IP: [141.151.70.9]

L2: Transferring IRAyou are so right when you say “look before you jump!”….i”m one of those people who always thought prenups were for movie stars and such….when i got married, retirement was in the distant future and i was “in love”…the early buyout retirement changed my life and my financial status in a hurry….before i retired, i was contently oblivious to how the 401k was doing, and just letting it ride….now i”m dealing with a large portfolio, pension, SEPP, etc, and the uneasy adjustment of being at home with hubby 24-7….
thank you for your advice about a post-nup…i”ll approach that topic when the home atmosphere is a little calmer!2007-10-05 18:30, By: Denise, IP: [65.12.159.224]

L2: Transferring IRAHello Denise:
All is not lost; potentially just some. Divorce statutes are a state-by-state issue. That said, most states are effectively “no fault” with a “fair & equitable”clause in them. What this translates to is that property that you brought to the marriage is generally considered separate property (yours only) and is not part of the marital estate to be divided either by agreement or by judical order. Translated again, the value of your IRA & 401(k) account as of the date of marriage should be considered separate property. However, the appreciation in the value of those accounts is generally considered to be marital property subject to equitable division between the spouses.
TheBadger
wjstecker@wispertel.net

2007-10-05 19:39, By: TheBadger, IP: [72.42.67.65]

L2: Transferring IRAIf you live in a community property state, your husband will probably have to sign off on naming someone else as beneficiary, just as if it was a qualified employer plan.
With respect to a marital settlement, these can differ considerably by state, but if you have a good attorney there is a good chance that only a small part of your IRA would be considered marital property. You, or your IRA custodian can produce a statement of fair market value just prior to your marriage to establish the balance you brought into the marriage. There are alot of moving parts to a marital settlement, but I would not just assume that 50% of your IRA is at risk. The post nup is also something to consider, if not too late. When an IRA is partitioned per divorce settlement, the after tax value is also considered vrs the gross pre tax amount.
Finally, if divorce proceedings start, the SEPP is at real risk of being busted if your entire IRA constitutes the SEPP universe. If at all possible, the IRA should be left intact until after the SEPP term has been completed. Unfortuneately, the IRS has issued a number of conflicting PLRs regarding treatment of IRAs under a SEPP that are split by the parties, and attorneys who areclueless onthis issue.

2007-10-05 19:49, By: Alan S., IP: [24.116.165.60]